‘Current account deficit to moderate below 1 pc of GDP led by growing exports’
The current account deficit is foreseen to moderate below 1 per cent of GDP led by growing merchandise and service exports coupled with decline in import dependency, says Amnish Aggarwal, Director – Research, Prabhudas Lilladher
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New Delhi, March 27: The current account deficit is foreseen to moderate below 1 per cent of GDP led by growing merchandise and service exports coupled with decline in import dependency, says Amnish Aggarwal, Director – Research, Prabhudas Lilladher.
India’s current account deficit narrowed to $10.5 billion (1.2 per cent of GDP) in Q3 FY24 as compared with $16.8 billion (2.0 per cent of GDP) in Q3 FY23 assisted by pick up in global export demand.
The import bill has been controlled by easing global commodity prices including oil amidst stable Rupee. Furthermore, net services receipts and remittances continue to render support to the current account balance.
The capital account was helped by buoyant FDI and FPI inflows. Furthermore, FDI inflows are foreseen to gather pace on the back of recovering growth prospects in investing economies combined with strong economic fundamentals domestically, the analyst said. Looking ahead, India’s balance of payment situation is likely to remain stable as resilient domestic tailwinds may outweigh the global headwinds.
Emkay Global Financial Services said the mild sequential moderation in current account deficit (CAD) to $10.5 billion (1.2 per cent of GDP) in Q3FY24 reflected offsetting of higher trade deficit with better services exports and private transfers. Q3 CAD funding has been smooth with massive FPI flows and consistently improving banking capital.
Despite slower FDI flows, the rise in capital account surplus ($17.4 billion) has meant net accretion of $6 billion. For FY24E, we maintain CAD/GDP at 0.8 per cent, led by incrementally improving goods trade deficit and solid services trade surplus, the brokerage said.
